BILL NUMBER: SB 1409 CHAPTERED
BILL TEXT
CHAPTER 177
FILED WITH SECRETARY OF STATE JULY 22, 2008
APPROVED BY GOVERNOR JULY 22, 2008
PASSED THE SENATE JULY 2, 2008
PASSED THE ASSEMBLY JUNE 23, 2008
AMENDED IN ASSEMBLY JUNE 5, 2008
AMENDED IN SENATE APRIL 7, 2008
INTRODUCED BY Senator Ackerman
FEBRUARY 21, 2008
An act to amend Section 1501 of the Corporations Code, relating to
corporations, and declaring the urgency thereof, to take effect
immediately.
LEGISLATIVE COUNSEL'S DIGEST
SB 1409, Ackerman. Corporations: annual reports.
Existing law, the General Corporation Law, requires corporate
boards to send a specified annual report to shareholders, consisting
of, but not limited to, a balance sheet, an income statement, and a
statement of cashflows accompanied by any report by independent
accountants. Existing law, except as otherwise specified, requires
that this report be sent to shareholders at least 15 days prior to
the annual meeting of shareholders.
This bill would specify that these requirements shall be
considered satisfied if a corporation with an outstanding class of
securities registered under specified provisions of federal law
complies with certain federal regulations relating to the Internet
availability of an annual report.
This bill would declare that it is to take effect immediately as
an urgency statute.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 1501 of the Corporations Code is amended to
read:
1501. (a) (1) The board shall cause an annual report to be sent
to the shareholders not later than 120 days after the close of the
fiscal year, unless in the case of a corporation with less than 100
holders of record of its shares (determined as provided in Section
605) this requirement is expressly waived in the bylaws. Unless
otherwise provided by the articles or bylaws and if approved by the
board of directors, that report and any accompanying material sent
pursuant to this section may be sent by electronic transmission by
the corporation (Section 20). This report shall contain a balance
sheet as of the end of that fiscal year and an income statement and a
statement of cashflows for that fiscal year, accompanied by any
report thereon of independent accountants or, if there is no report,
the certificate of an authorized officer of the corporation that the
statements were prepared without audit from the books and records of
the corporation.
(2) Unless so waived, the report specified in paragraph (1) shall
be sent to the shareholders at least 15 (or, if sent by third-class
mail, 35) days prior to the annual meeting of shareholders to be held
during the next fiscal year, but this requirement shall not limit
the requirement for holding an annual meeting as required by Section
600.
(3) Notwithstanding Section 114, the financial statements of any
corporation with fewer than 100 holders of record of its shares
(determined as provided in Section 605) required to be furnished by
this subdivision and subdivision (c) are not required to be prepared
in conformity with generally accepted accounting principles if they
reasonably set forth the assets and liabilities and the income and
expense of the corporation and disclose the accounting basis used in
their preparation.
(4) The requirements described in paragraphs (1) and (2) shall be
satisfied if a corporation with an outstanding class of securities
registered under Section 12 of the Securities Exchange Act of 1934
complies with Section 240.14a-16 of Title 17 of the Code of Federal
Regulations, as it may be amended from time to time, with respect to
the obligation of a corporation to furnish an annual report to
shareholders pursuant to Section 240.14a-3(b) of Title 17 of the Code
of Federal Regulations.
(b) In addition to the financial statements required by
subdivision (a), the annual report of any corporation having 100 or
more holders of record of its shares (determined as provided in
Section 605) either not subject to the reporting requirements of
Section 13 of the Securities Exchange Act of 1934, or exempted from
those reporting requirements by Section 12(g)(2) of that act, shall
also describe briefly both of the following:
(1) Any transaction (excluding compensation of officers and
directors) during the previous fiscal year involving an amount in
excess of forty thousand dollars ($40,000) (other than contracts let
at competitive bid or services rendered at prices regulated by law)
to which the corporation or its parent or subsidiary was a party and
in which any director or officer of the corporation or of a
subsidiary or (if known to the corporation or its parent or
subsidiary) any holder of more than 10 percent of the outstanding
voting shares of the corporation had a direct or indirect material
interest, naming the person and stating the person's relationship to
the corporation, the nature of the person's interest in the
transaction and, where practicable, the amount of the interest;
provided that in the case of a transaction with a partnership of
which the person is a partner, only the interest of the partnership
need be stated; and provided further that no report need be made in
the case of any transaction approved by the shareholders (Section
153).
(2) The amount and circumstances of any indemnification or
advances aggregating more than ten thousand dollars ($10,000) paid
during the fiscal year to any officer or director of the corporation
pursuant to Section 317; provided that no report need be made in the
case of indemnification approved by the shareholders (Section 153)
under paragraph (2) of subdivision (e) of Section 317.
(c) If no annual report for the last fiscal year has been sent to
shareholders, the corporation shall, upon the written request of any
shareholder made more than 120 days after the close of that fiscal
year, deliver or mail to the person making the request within 30 days
thereafter the financial statements required by subdivision (a) for
that year. A shareholder or shareholders holding at least 5 percent
of the outstanding shares of any class of a corporation may make a
written request to the corporation for an income statement of the
corporation for the three-month, six-month, or nine-month period of
the current fiscal year ended more than 30 days prior to the date of
the request and a balance sheet of the corporation as of the end of
the period and, in addition, if no annual report for the last fiscal
year has been sent to shareholders, the statements referred to in
subdivision (a) for the last fiscal year. The statements shall be
delivered or mailed to the person making the request within 30 days
thereafter. A copy of the statements shall be kept on file in the
principal office of the corporation for 12 months and it shall be
exhibited at all reasonable times to any shareholder demanding an
examination of the statements or a copy shall be mailed to the
shareholder.
(d) The quarterly income statements and balance sheets referred to
in this section shall be accompanied by the report thereon, if any,
of any independent accountants engaged by the corporation or the
certificate of an authorized officer of the corporation that the
financial statements were prepared without audit from the books and
records of the corporation.
(e) In addition to the penalties provided for in Section 2200, the
superior court of the proper county shall enforce the duty of making
and mailing or delivering the information and financial statements
required by this section and, for good cause shown, may extend the
time therefor.
(f) In any action or proceeding under this section, if the court
finds the failure of the corporation to comply with the requirements
of this section to have been without justification, the court may
award an amount sufficient to reimburse the shareholder for the
reasonable expenses incurred by the shareholder, including attorney's
fees, in connection with the action or proceeding.
(g) This section applies to any domestic corporation and also to a
foreign corporation having its principal executive office in this
state or customarily holding meetings of its board in this state.
SEC. 2. This act is an urgency statute necessary for the immediate
preservation of the public peace, health, or safety within the
meaning of Article IV of the Constitution and shall go into immediate
effect. The facts constituting the necessity are:
In order for corporations in the State of California to take
advantage of technological improvements and achieve the costs savings
afforded by federal regulations as soon as possible, it is necessary
that this act take effect immediately.